Suddenly, things ain’t looking great for the AI industry. Or at least for the people pouring loads of money into it.Situational Awareness, a much-hyped AI hedge-fund whose 24-year-old founder Leopold Aschenbrenner preached endless AI gains, basically imploded over this month amid a mass tech sell-off. The Wall Street Journal reported that it’s now down 67 percent in July, forcing Aschenbrenner to desperately seek clients to buy its shares on the cheap to cover its losses.“We let you down this month,” the fund wrote in a letter to clients, per the WSJ.Aschenbrenner, a former OpenAI researcher who had zero investment experience before launching the fund, has been hailed as the “Nostradamus of AI.” He apparently didn’t predict his rapid reversal of fortunes, though.The Financial Times reported that his fund returned 439 percent for the year through June, and was up 1,551 percent since its founding. Then came July. According to CNBC, the fund assets reached a peak of $45 billion, before beginning a precipitous decline this month. Pretty much everything went against its way. Its commitments to AI infrastructure tanked when the likes of the semiconductor manufacturer SK Hynix dropped off a cliff. And it shorted software companies — which investors once feared would be outmoded by AI labs — like Adobe, which instead continued to steadily climb. Other companies it invested in, including Sandisk, Micron, and CoreWave, are all down more than 35 percent this month, CNBC noted.As the dominoes fell, Aschenbrenner sent a letter to investors to quell their fears, highlighting how well it had performed until this point. Boldly, he also said that the mass tech sell off was a “particularly good time to add funds,” the FT reported.But when the assets kept tanking — and more money didn’t come in — Aschenbrenner started frantically calling investors trying to get them to sell assets or pour in fresh capital, according to the reporting. When it got even worse, his clients couldn’t reach him.“Leopold just stopped taking calls,” one investor told the FT.With nowhere to turn to, Situational Awareness sold the majority of its public assets to the investment firm Citadel, though it hung onto its stake in Anthropic. The FT reported that Citadel’s vulturous purchase of Situational Awareness’s shares “marks one of the largest and most sudden stock transactions in Wall Street history.”Situational Awareness, despite commanding billions in assets, operated with a skeleton staff of only four investment professionals and eight employees overall, the FT found in a regulatory filing. The fund used borrowed money to buy shares, which helped boost its returns, but made its losses far worse when those assets declined.AI stocks will likely weather this storm. The real warning sign is that investors are so blinded by AI that they’re entrusting their billions to someone who had no idea what they were doing.More on AI: Microsoft CEO Warns That Companies Embracing AI Could Drive Themselves Out of BusinessThe post A Prominent AI Investor Is Now Crumbling, in What Could Be a Sign of Things to Come appeared first on Futurism.